What You Need to Know Before Renting a Car

Earlier this year I had to rent a car for one day, so I found what I thought was the most reasonable rate with a company, and went on my way. I ended up returning the car a half-hour late and was forced to pay for two days instead of one. Corporate policy, I was told by the guy checking me in: no half-day rate, no leniency allowed. It was an expensive lesson about the multitude of strategies rental car companies use to beef up your bill.

After a sharp decline in driving trips during the 2008 and 2009 recession, Americans have resumed hitting the road. AAA expects 34.7 million of us to travel over Memorial Day weekend(1), and, with gas prices actually lower by 2-cents a gallon compared to a year ago, many of these trips will be by car. (2) Even if you plan to fly to your destination, you usually end up renting a car once you land.

To avoid sticker shock when you turn the vehicle back in, it pays to do your homework ahead of time.

For instance, take that extra insurance rental car agents are always trying to convince you to buy. The old advice was that if you had your own car insurance, you probably didn’t need this. But that’s changed, according to Jeff Blyskal, senior editor at Consumer Reports, because “car rental companies have started charging for loss-of-use.”

In other words, if you cause an accident, your own car insurance will cover damage to the other vehicle. However, if the car you rented is also damaged, it will be out of service until it is repaired, and rental companies expect you to cover this. So if the fee to rent the vehicle is typically $100 a day and it's in the repair shop for a week, the rental company has potentially lost $700. “Your own policy might not cover this,” says Blyskal.

Don’t wait until you’re standing at the counter with two tired toddlers and a stressed-out spouse to weigh your options. Blyskal suggests checking with your car insurance provider so you know what is and what isn’t covered before you leave home. Be sure to ask:

Does your policy cover damage to the rental car?

What about loss-of-use?

Whether you are traveling for pleasure or business?

Does it cover fees the rental agency might incur, such as towing charges?

If your personal auto policy doesn’t cover these things, your credit card might. According to Blyskal, “American Express (AMX), MasterCard (MC) and Visa (V) pay for loss-of-use as long as the rental company provides evidence.” But only if you use that credit card to pay for the rental.

The rental car contract itself might provide some protections, assuming you take the time to read the fine print. In addition, some states have their own consumer protection laws that limit your liability. Just don’t have an accident driving a rental car in Texas where, according to Blyskal, “the consumer is liable for all lost and damage, including loss of use.”

Keep in mind that even if you do opt for the “collision damage waiver” or a “loss damage waiver,” neither policy covers injuries you incur or loss or damage to your personal property.

Although you’re usually in a rush to jump in the car and get to your destination, AAA recommends taking a minute to inspect the vehicle you’re renting for scratches and dents. If these aren’t noted on your rental contract, you could be blamed for them when the car is returned. In addition, AAA’s Heather Hunter says “make sure you take advantage of any discounts” you’re entitled to, such as a reduced rate as a AAA member or senior. Don’t sign the agreement unless these are reflected in the rate you’re being charged.

In addition to extra insurance, other addons that make a lot of money for rental car companies include such things as child car seats and GPS devices. In both cases, you can save a bundle by bringing your own. If your cell phone doesn’t include an app for driving directions, download one, even AAA offers a free mobile app for iPhone and Android devices. It provides directions, gas prices and allows you to compare hotel prices in your destination. You can even book your room.

If you are renting a car in one location and turning it back in in another, don’t just focus on the daily rate you will be charged--drop-off fees can be shockingly high Consumer help network Call for Action reports that one individual contacted them for assistance because the drop-off fee for picking up a car in New Mexico and turning it in in Las Vegas was $350- more than the rental of the car itself!

Know your rights ahead of time so you don’t encounter any negative surprises standing at the counter. For instance, what happens if the agent at the rental car counter says the vehicle you reserved isn’t available and tells you have to pay more for an upgraded model? (You don’t.) What should you do if your rental car breaks down? (The rental agreement should spell this out.) Is it legal for the rental car company to refuse to rent you a car? (Yes. Most require that you be at least age 21. If you have a bad driving record, you can also be turned down.) The Federal Trade Commission’s website offers a list of things to be aware of before you rent a vehicle.

Heading outside the United States? Be aware that the rules may be different in a foreign country. Some also require an “International Driving Permit. According to Hunter, this is essentially a translation of your U.S. driver’s license so that foreign law enforcement officials can read it. You can get one at a local AAA office for $15. You’ll also want to check with your auto insurance provider to see what kind of coverage you will have when driving in another country.

Now that travel is picking up, Hunter says planning ahead is key. “Back in 2008 and 2009 you could get last-minute travel deals. Now, the best deals will be found further in advance of your trip.”

Oh, and check whether your rental car company offers a grace period on returns.

1. This is slightly less than the July 4 holiday which, historically, sees the most travel, mainly because kids are out of school. The 12-year average is 35.2 million.

2. AAA forecasts the national average for regular unleaded gasoline will be $3.20/gallon this summer, compared to $3.40/gallon last year.

Ms. Buckner is a Retirement and Financial Planning Specialist and an instructor in Franklin Templeton Investments' global Academy. The views expressed in this article are only those of Ms. Buckner or the individual commentator identified therein, and are not necessarily the views of Franklin Templeton Investments, which has not reviewed, and is not responsible for, the content.

If you have a question for Gail Buckner and the Your $ Matters column, send them to: yourmoneymatters@gmail.com, along with your name and phone number.